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Brussels, 15 th December 2009

State aid: Commission approves Latvian state guarantee to JSC Liepājas Metalurgs

The European Commission has authorised, under EU state aid rules, an €89 million state guarantee that Latvia intends to provide to the steel manufacturer JSC Liepājas Metalurgs (LM) for financing its modernisation. LM is an economically sound company of strategic importance for the Latvian economy. Due to the financial crisis, LM could not raise money necessary for its modernisation without a state guarantee. The decision is based on the Commission’s Temporary Framework for state aid measures giving Member States additional scope to facilitate access to finance in the present economic and financial crisis (see IP/08/1993 ). The Temporary Framework's wage cap restriction (which limits the maximum amount of loans to be covered by state guarantees) has recently been amended to take into account the situation of low wage countries such as Latvia.

LM is planning to use a commercial loan of €89 million for a €95 million project to continue the modernisation of its installations, notably with a view to continuing to meet EU environmental standards. 90% of the guarantee to be provided by Latvia meets the conditions of the Commission's Temporary Framework. In particular, the beneficiary pays an adequate premium for the provision of the guarantee and provides collateral covering a large proportion of the guaranteed amount. Moreover, the loan and the corresponding guarantee would be limited to duration of ten years.

The remaining 10% of the state guarantee will be provided on market conditions and therefore does not constitute state aid. For the market-priced part of the guarantee, the Commission concluded that, in the current market situation and taking into account all conditions of the transaction, the premium charged by the Latvian State constitutes the market price for the risk involved in issuing such a guarantee.

On 8 December 2009, the Commission introduced a technical modification to the Temporary Framework, to take into account the situation of Member States with low labour costs.

This amendment gives Member States two alternatives to determine the maximum amount of investment loans to be covered by a guarantee under the Temporary Framework. In addition to the original limit, based on the total annual wage bill of the beneficiary, Member States can now also use an alternative limit based on the EU 27 average labour costs, as established by Eurostat.

The non-confidential version of the decision will be made available under the case number N 670/2009 in the State Aid Register on the DG Competition website. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .

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